Here I present you Inspire Medical Systems (INSP

Investment Analysis Clubs Saul’s Investing Discussions
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I have been reading this board for a while and I love it and profited from it. I really want to contribute something to show my appreciation. Here I present you Inspire Medical Systems (INSP).

I come to know this company because my personal interest in sleep apnea treatment. CPAP is the mainstream treatment and nobody like it. INSP treats patients who need to use CPAP but cannot tolerate it.

INSP use minimally invasive solutions to treat patients with obstructive sleep apnea (OSA). Their Inspire system is the first and only FDA-approved neurostimulation technology that provides a safe and effective treatment for moderate to severe obstructive sleep apnea. Watch this movie to see how it works. If you don’t know how CPAP works, you should go to youtube to see how CPAP works. It sucks. Then you will have own comparison.

https://www.inspiresleep.com/what-is-inspire-therapy/how-ins…

You can also read their academy paper in New England Journal of Medicine if you are academically inclined.

Upper-airway stimulation for obstructive sleep apnea. Strollo PJ Jr et al. N Engl J Med. (2014)
https://www.nejm.org/doi/full/10.1056/nejmoa1308659

The patients love this new therapy. Check this link out:

https://myapnea.org/forum/inspire-sleep-apnea-treatment

INSP was found in 2007 and was was spun-off from Medtronic Inc. So it does have good and experienced executives. It IPOed on May 3rd this year, last month and raised 112 million. After IPO, the insiders including executives and directors still own 42% of the shares (page 152 of the prospectus).

Market cap: 760m

Revene:----------Growth yoy

2015-----8.01
2016-----16.43----105%
2016-----28.57----74%

2017q1—5.3
2018q1—10.04----90%

So its revenue grows like crazy and it fits this board well. With the new money raised from their IPO, they will hire more sale people and should grow even fast in next few years.

TAM: 10 billions in the US alone.

Since it is a new IPO, the prospectus provides the best information. Check out the end of page 2 and the beginning of page 3:

https://investors.inspiresleep.com/investors/financials-and-…

“Currently, there are approximately 17 million individuals in the United States with moderate to severe OSA. Based on industry sources, we estimate that approximately 2 million patients are prescribed a CPAP device annually in the United States. Further, based on published literature, we estimate that at least 35% of patients prescribed a CPAP device are not compliant with the therapy and approximately 70% of those non-compliant patients have an airway anatomy that would allow for effective treatment with Inspire therapy. As a result, we believe the annual total addressable market for our Inspire therapy in the United States to be approximately 500,000 patients, which, based on our average selling price per implantation, represents an estimated annual market opportunity of approximately $10 billion. We also believe there is a substantial market opportunity outside the United States.”

CAP: Very strong, could be very long.

Inspire system is the first and only FDA-approved neurostimulation technology. Of course, others could be developing new ones. It might take a long time to get FDA approved though.

Price target: If it can take 10% of market opportunity in the next few years, its revenue will be 1 billion. The growth stage medical devices companies usually command a p/s ratio of 6-8 unless you are ALGN (ps: 17) or ABMD (ps: 31). Apply p/s ratio 8 to INSP, we will get an 8 billions dollars company in a couple years, a 10 bagger.

It is still a very small company. But it is not NKTR since their therapy is approved and is selling and generating revenue. I feel like it is ABMD at $20.

I am an amateur who is trying to emulate the writing here. Please do your own due diligence before investing.

Tom

Who has a 4% position.

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I have an interest because I hate my CPAP. But I also read that surgery is required to use this new method and sometimes it creates other problems that you don’t know about until after the thing had been installed surgically.

Now, I am shooting from the hip here and providing a rough sketch of what I heard in a news cast so please take this with a grain of salt. I pray I am wrong. I pray that this might work for me someday. And over all I hope your research creates a new position in my portfolio. . .

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I hope it can help you also. Check out these publications. You should be able to access the full text if you have access to a good library. The company might be able to send you reprints.

https://www.inspiresleep.com/for-healthcare-professionals/pu…

The surgery is only a short outpatient surgery. It seems the Adverse Events are not bad according to my reading. In this five year study, here is the section that describes the Adverse Events.

Upper Airway Stimulation for Obstructive Sleep Apnea: 5-Year Outcomes
B. Tucker Woodson, MD, Kingman P. Strohl, MD, Ryan J. Soose, MD,
http://journals.sagepub.com/doi/abs/10.1177/0194599818762383…

Adverse Events

After 5 years, 8 participants (6% of 126) had a total of 9 serious device-related adverse events requiring surgical repositioning or replacement of the neurostimulator or implanted leads. One participant had 2 revision procedures to reposition the neurostimulator and the sensing lead to resolve discomfort. One participant underwent stimulation lead repositioning due to unfavorable tongue movement pattern and to improve therapy response. Four participants had insulation failure with the sensing lead and underwent replacement of both the neurostimulator and the sensing lead. For 1 participant, the stimulation lead was inadvertently cut and then required replacement.
Discomfort due to electrical stimulation was the most common nonserious adverse-reported event, occurring 81 times during the first year. For most subjects, this complaint was resolved by reprogramming the stimulus levels and was reported only 5 times during the fifth year. Tongue abrasion from tongue movement was reported 28 times the first year and was reduced to 2 times during the fifth year. Table 5 provides a detailed list of adverse events.

With more experienced surgeons, it should get even better.

Regards,

Tom

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CPAP is the mainstream treatment and nobody like it. INSP treats patients who need to use CPAP but cannot tolerate it. – Tom

I briefly had a CPAP hooked up to me while in the hospital. Some ding a ling doctor decided he didn’t like the way I breathe (I tend to breathe very shallowly and my O2 levels didn’t meet his preferences).

Machine decides how and when you should breathe. After being hooked up a while, I decided I’d rather go without even if I had severe sleep apnea (which I don’t) and would have a heart attack. Sounds extreme, but I would rather die than have to rely on one of those torture machines.

<Tell them how you really feel, Rob!>

Nice to know there is an alternative if I ever need one. Thanks!

Rob
Rule Breaker / Market Pass Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Before any readers make any medical decisions or investing decisions it should be noted that CPAP is absolutely the standard of care in the treatment of OSA. If you don’t believe me (Board certified sleep MD) you can look at literally 1000s of scientific articles or if you prefer you can examine the finances of Resmed (ticker RMD) which has market cap of 15 billion based on the sale of cpap alone!

Every day I spend my time with patients that love their cpap, a few that hate their cpap and more that can learn to love it. Its not for everyone but there are few things in medicine that are as safe and effective. I am happy to correspond via DM with anyone needing advice or direction.

Now, that being said, OSA is an enormous health burden. It is estimated that their are over 1 BILLION people on this planet with sleep apnea and the vast majority are undiagnosed. Their is a great opportunity for a competitor to CPAP, even it represents a small portion of people suffering.

I have seen patients with the Inspire device, spoken with their management and sales force. I am waiting for a few things including 1) more replication studies 2) more long term data and 3) more early adopters to guide us in terms of tolerance and side effects.

I believe the company is working on hard on reimbursement issues. Insurance companies need a lot of convincing that this is indicated and authorized. Something to watch moving forward. They need to make this process easier and to have more well trained surgeons. The limited studies were done in highly selected groups of patients at specialized centers.

Despite my clinical bias it will be interesting to see how the numbers progress and even a small slice of the market could make for a good investment.

JC
-no position in INSP or RMD

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Watch this movie to see how it works.

https://www.inspiresleep.com/what-is-inspire-therapy/how-ins……

Probably just me but I could not find a movie at that link.

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For me the movie that explained it was just to the right of this block of text.

How Inspire treats sleep apnea

During sleep, airway muscles relax and block your breathing. Inspire works inside your body to open the airway without disrupting sleep.

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anybody know what kind of anesthesia is necessary to install the device? Local is near 100% safe not so with general.

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Hi JC,

Thank you very much for your comments. This board is just so wonderful that I am able to talk to people with first-hand experience treating apnea like you.

CPAP is indeed the standard of care. In the US, INSP only target the 35% of patients with moderate to severe OSA who are prescribed a CPAP device but are not compliant with the therapy. In Europe, there is no such restriction. As a sleep MD, I am sure you are fully aware of the conclusion of many published studies that at least 35% of patients are not compliant with the CPAP therapy.

There are 17 millions patients in the US alone with moderate to severe OSA. Out of them, 2 millions are prescribed CPAP, 35% of them are non-compliant, 750k patients. Approximately 70% of those non-compliant patients have an airway anatomy that would allow for effective treatment with Inspire therapy, so the TAM is 500k patient. They just need to sell to 10% of these patient, 50k patient, to generate 1 billion dollars of revenue, which will make our investment a wild success. Given the highly motivated patient population, I think there is a good chance that they can do that. I have read many patients’ comments against CPAP in the apnea forum. Many patients are willing to give a limb to get rid of CPAP.

Regards,

Tom

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Hi Tom,

I am cheering for Inspire as we need new and better tools at our disposal. You are right - even a small portion of the pie might make for an excellent investment.

The therapy actually requires 2 procedures:

  1. Sleep endoscopy - performed by a physician while patient is under anesthesia. This typically requires propofol, OR time an anesthesiologist and an ENT surgeon to exam the airway. If favorable airway dynamics are registered the device can be pursued at a following time.

  2. Surgical implantation is done under general anesthesia as described in the video.

At our institution, this overall process is a stumbling block. I have had difficulty getting the ENT surgeons engaged and interested due to this 2 step model. OR time and opportunity costs require a real champion to commit to the procedure. We have one local doctor who is more independent and aggressive who does the procedure but he is the only one in an area of ~ 4 million people.

Worth watching and I am happy to bring anything new here as it evolves.

Cheers
JC

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Ah … digging into it I see the media player is Flash based.

Unfortunately by default Flash is no longer supported on my shiny new Chrome browser :slight_smile:

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Hi JC,

Thanks for your first-hand observation. That is really valuable. I will really appreciate if you can keep us updated.

It is likely that the current procedures were formulated by the investigator clinicians in large academic hospitals. It will evolve to be more efficient. As you know these academic investigator were usually paid by university endowment. They want to see as few patients as possible. They just want to advance the science quickly and safely to publish.

Recently, Merrill lynch analysts wrote the following after they attended the SLEEP meeting in Baltimore, MD on June 4:

We found that the awareness of Inspire in the clinical community was actually quite high and many of the doctors stopping by the Inspire booth were asking questions about how do we get insurance to pay and how do we get a center in our region rather than asking questions about how the therapy works.

Once more clinicians (whose main responsibility is to treat patients) join in. The efficiency and economics will improve significantly.

The analysts also mentioned, it is likely that the American Academy of Sleep Medicine (AASM) could include Inspire in its guidelines in mid-2019.

With all the momentum, hopefully they will have some moderate success, which should be enough for the investment.

Regards,

Tom

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This is not exactly a recent thread, but I did not feel like starting a new one to only talk numbers.

I listened to INSP Q3 and Q4 2022 this week as I want to have some high growth stocks that are not SaaS. I loved the reports especially Q4. What is not obvious from the numbers is that they should be GAAP profitable in 2023. They won’t commit to it but it became pretty clear from the Q&A.

INSP revenue
INSP revenue853×480 47.7 KB

On the slightly lower recent gross margin:

The Q4 2022 results were achieved despite some supply chain constraints and a manufacturing transition that explains the gross margin reduction:
“Gross margin was 83.9% for the three months ended December 31, 2022, compared to 85.8% for the corresponding prior year period, with the reduction primarily due to higher costs of certain component parts caused by inflation and supply chain challenges, and additional costs associated with the transition of the manufacturing lines to produce our new silicone-based leads, partially offset by increased sales volume and a price increase which began taking effect for some U.S. customers in May 2022.”

I was particularly happy not to hear the usual about headwinds and macro challenges. Headwinds appears only in connection to FX exchange rates. Challenges appears in connection to supply chains and as ‘resolved.’

Transcript of Q4 call:

I find it difficult to find something to not alike about INSP. I wonder what others think about INSP.

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